Buying vs. Building: Scaling Beyond a Single App — Josh Peleg, BlueThrone

0:00Hello, I'm your host David Barnard. My guest today is Josh Peleg, head of M&A and business development at BlueThrone, a VC-backed portfolio of consumer apps that acquires and partners with the best consumer apps in the business. On the podcast, I talked with Josh about red flags that tank app valuations, why subscription-only apps are leaving money on the table, and how bootstrap founders are cashing

0:27out for millions in months, not years. Hey Josh, thanks so much for joining me on the podcast today. David, great to be here. Uh so, you and I were hanging out in Austin Friday and had such a great conversation. I think I said multiple times we should have just like set up cameras and mics

0:44and uh recorded that conversation. Uh you were like, "Hey, I'm still in Texas for a few more days." And so, here we are in a podcast studio in Austin recording a podcast. Yeah, it's super exciting. So, the first thing I wanted to talk about is BlueThrone, the company you work for. So, you do business development and M&A at BlueThrone. Uh

1:02so, what is BlueThrone? Yeah, so I came from mobile gaming where I did M&A and then jumped into BlueThrone about a year ago. And their strategy is really interesting. So, essentially BlueThrone's goal is to become the number one app acquirer in the world. And the way it started is pretty different to the way it looks today. So, the way it started was a kind of spray and pray approach. BlueThrone saw all these little apps doing kind of decent revenue, and we're talking about QR code scanners, flashlight apps, the small radio apps that we kind of all all know and saw back in the day. And the play

1:31was to go wide. So, initially BlueThrone raised a bunch of VC money, and they bought almost 100 apps, the smaller ones. And it was a very much go wide approach. And what we learned at that point was that so many of them have been pumped full of revenue at the time of sale, right? So, after you buy them, they

1:47start to die. Yeah. But also because they're quite shallow products, their longevity is very limited. Yeah. And we learned the lesson the hard way. So, following this, we had like a new shift in strategy. We went from Blue Throne 1.0 to Blue Throne 2.0. So, before we get into 2.0, uh I did want to dig into that that first phase. Cuz there are still a lot of buyers in the market, and not that they're not that they're going to, you know, ignore the signs of a pump and dump. Not that they're, you know, only going to buy crappy apps or whatever. There's a lot of players in the market who are using

2:17Blue Throne's previous strategy of buying a lot of apps, they're doing decent revenue, and building that kind of portfolio, which now Blue Throne is not interested in, but there's a lot of players in the market who do. So, before we get into the new strategy, what kind of apps were you looking for during that time? And like, what were the signals of a of a decent acquisition? What signals like, you know, said, "Hey, don't buy this app." Cuz you know, a lot of people listening to this podcast, maybe they spun up a side project, and hey, it's doing, you know, 20K in MRR, and maybe they want to flip

2:47it. Like, what does that look like? Yeah, so I would never push someone away from flipping it at the early stage. It's definitely doable, and the app market today in terms of buyers and sellers is in a is in a very liquid position. There are lots of sellers, and there are lots of buyers. So, if you do want to sell, you'll probably find the

3:03right price point. Now, when we were doing this strategy, a lot of things we were looking for were financial-based. So, we were looking for like strong EBITDA and strong revenue, and we were less concerned with the core app metrics, things like the retention, the churn, conversion to paying, etc. Okay. looking at me, and you're smiling cuz

3:18you're like, that sounds kind of stupid. And we realized this the hard way, because we saw the apps as purely financial assets back then. Gotcha. Because we were looking at shallow products, like, for example, a flashlight app. Right. This is what led us to it to the next step. But essentially, back in the day we were viewing them more as financial products, and I think a lot of buyers at that price point think of apps as financial assets that deliver returns over X

3:40period of time. Yeah. So, in that case, you're probably looking more for organic acquisition. And when you say EBITDA, earnings before interest, tax, depreciation, and amortization. I always forget all the all the parts of the long acronym. So, essentially, if if you're spending 40k a month on user acquisition and you're making 40k a month, you have zero EBITDA. You're not a good financial asset. So, what you all were looking at was apps that were great at ASO. They had some kind of organic growth mechanism that were just spinning off cash. So, if that's So, if you've built a side project app and you're making 20k a month in MRR and you don't have a

4:17bunch of expenses, that is attractive as a financial asset. Literally, yeah. It's exactly what you what you did describe there. We should also kind of identify that the time period we're talking about, which is kind of 3 to 4 years ago, this whole trend of doing crazy organic on TikTok didn't exist. So, when we say TikTok, we're really talking about ASO, keywords. And if you picture it, it's

4:38really those apps that were the titles. So, the apps that were called flashlight app or the apps that were called QR code scanner. It's really trying to maximize that ASO. Right. And these days, a lot of people talk about organic TikTok as if it's free, but they're actually paying a ton of creators. So, similarly, if you're making 20k a month in MRR and you are spending 20k a month on on organic TikTok or that's your full-time job, it's like you're just churning out assets. If you're going to sell that to somebody with this more kind of financial asset approach, the buyer is going to say, "Oh, well, wait. You know,

5:1440 hours a week of a great marketer's time, you know, creating these assets that go viral on TikTok or, you know, whatever kind of organic motion that you have, if it's a high either cost because you're paying creators or a high time cost, you know, acquirers are generally going to look at that as a cost basis and not look at that kind of an app as a

5:37financial asset, right? Correct. I think us in the industry labeling this TikTok strategy organic is very misleading. And even though you could pay $5 for a single UGC video that shows off your app with a nice CTA at the end, and you may as well get a million, two million views, which may convert into a a 10% conversion rate, and you kind of get some downloads from that. That being said, the time invested to get to that point is significant, and I'm talking from experience. We recently built this UGC

6:05machine at BlueThrone. It took us like 6 months to get like our first viral video, and that's not one person's time. That's like multiple people across multiple disciplines doing the research, doing the execution. So, there is a cost associated to this organic. But, like all great mechanisms within the app business, you get better over time, and you optimize, and you're able to hit those targets faster with less resources as you get better, for

6:27sure. So, then what would your advice be to somebody in that position? Either they're just getting started, and they're thinking, "Hey, I'd love to, you know, build this app and exit it in 12 month." I mean, I see this on Twitter all the time. Like, "I'm going to I'm going to build this app, and I'm going to sell it for 100k in a year." What would your advice be to a founder like that today to kind of optimize that for

6:49a meaningful acquisition? So, if you're trying to optimize for a meaningful acquisition, let's say within a 12-month time frame, it's completely doable, and we see it the whole time. I think what you have to be is an absolutely killer marketer. Right. It's not about your dev skills, and we talked about this over lunch on Friday,

7:05right? In a time when anyone can build, and the barriers to build are so low because of AI helping us here, the real differentiators are distribution. And that's why we're seeing, you know, the people like the App Mafia guys, and also a ton of other kind of people who don't make the spotlight as much, but really amazing marketers and distributors scaling their apps very, very quickly through TikTok, whether it's founder-led content, so it's them telling their story, whether it's them interacting really healthily with influencers in

7:32their niche. Uh let's take an example. Let's say you've got a kind of Christian religion-based app, and you connect with the Christian religious influencers in that niche, and you build relationships with them, and they spin out content for you, that can just shoot you up the charts very quickly as well. And it's actually these guys that we're seeing get those exits within 12 to 18

7:50months. And from the buyer's perspective, like I think if I think about Blue Thorne's perspective here, we'll always have concerns that an app that's only been around for 12 to 18 months has less historical data to put a value on top of it, right? Cuz when you're valuing a business, you're looking at past

8:06performance. That being said, that there are ways to do it because of the beauty of apps, which is you can measure retention and you can measure churn and you can measure repeated customers and you can measure conversion of free to paying users. So, you can pretty accurately predict how the app's going to do as long as you have maybe 6 to 9 months of

8:21data from that app. What would be the red flags then that you would advise folks to try and optimize away from? And if you're thinking, okay, I see this app, you know, they they sprung up from nothing, they're doing 50k in MRR, but what are the when you're doing due diligence, what are the red flags you're looking for that say, oh, this is this is either one, a much lower multiple that we're willing to pay, or two, just like not an

8:47acquisition anybody would want to do? That's a really good question. Let's think about um acquisition multiples on like a spectrum. For those who aren't aware, a multiple is a number you'll apply to your annual revenue, which will give you the valuation. And you can apply it to your revenue or your EBITDA. But go look that up on YouTube and you'll learn a lot more. Essentially, multiples we can kind of view it on a on a spectrum and at the lower end of the spectrum, you've got apps that are primarily doing revenue through advertising within the

9:15app, right? It's not very predictable. As a buyer, I cannot uh predict that into the future. It also depends on your daily or monthly so, it's a little bit hard to put a true value on. It also depends the demographic of your users because your ads are more valuable to tier one base users like in the US compared to tier three in India, for

9:30example. Right. As you move towards the middle of the spectrum, you've got ads that are monetizing through ads and IAPs, which is in-app purchases or one-time purchases. Now, in-app purchases are great and I'm sure we'll get on to this uh in a minute, but they're a little bit dangerous when it comes to valuing your app because it's not recurring revenue. It doesn't hit that ARR definition. Now, on the far right of the spectrum, to get the biggest valuation possible, you're looking at apps that are pretty much 100% recurring revenue, so subscription-based apps. And why is that? It's because

10:01as a buyer, your revenue is predictable. If I have 12 months of data of your app, I know how many users are going to resubscribe when their yearly or monthly subscription is over, so I can predict the amount of money that your app is going to pull in into the future, which makes it really easy, whether it's me or anyone else really, to basically value the app and how much money it's going to

10:20generate. And then you do that against the expenses. Generally. So, you're not And And I think that's a uh something a lot of people get mixed up about when they're thinking, "Oh, my app's worth hundreds of thousands of dollars." And then, you know, to your point earlier, if you're an AI app and you're spending like 50% of gross revenue on your AI costs, then then you're going to get valued on the remaining 50%, but if you're spending 50% on AI costs and you're spending 25% on marketing, and you're spending 20% on like salaries that would need to continue in the business as an attractive um acquisition, it's it's

11:01looking less and less attractive as those costs go up higher and higher. And then the other thing I'll say, and I was just tweeting about this yesterday, is that what most people in our industry call MRR and ARR are not actually MRR and ARR. Uh so, I'll I'll get on my soapbox for 1 sec and say monthly recurring revenue, annual recurring revenue, you know, in RevenueCat, we have this great chart now, and then I've been lobbying to to create some additional charts around this is that you know once somebody's turned off that auto renew very early in the in the cycle and we have some data at

11:38RevenueCat that actually shows the highest month of people turning off auto renew in an annual subscription is actually the first month. And so you can get pretty predictive of what revenue's actually going to recur if you know that first month of people turning it off and then fit the curve. And so you know when you look at your dashboard and it says you know 100k in MRR or you know a million dollars in ARR, it's not ARR, it's AR and then to get to ARR, you really need to discount by like the known churn stats. And whether that's you know predicting into the future with that first month or whether that's you

12:21have a year or two of data where you can look back and see what those cohorts are retaining like. You need to discount that by the known churn or even the estimated churn to get a true ARR and a true MRR cuz again, I just think it's in consumer where the you know median

12:40retention of an annual plan is like 35%. It's not ARR, it's just not. That brings me on to like a really interesting point if if we draw this back to the kind of valuation topic which is so often you get a founder comment and say hey I've got x amount of subscribers on the yearly subscription. And it's recurring cuz it's yearly. But the killer question is like how many people are going to come back and pay at the end of that time period? And if your app has not been around for 12 months, you cannot tell me your resubscriber

13:07rate. You you just can't. But but you can estimate it. Yeah. You can estimate it. Uh but you can't tell me for a fact how many users are actually going to come back and and pay that money again. Yeah, totally. So high churn rate would be one of those red flags and Yeah, high churn rate would be one of those red flags. Let's do four more and let's just kind of list them off so listeners have like a a checklist, right? So top one is churn rate because that's where your

13:29subscription revenue is coming in it. The churn rate kind of dictates how stable that revenue is. It's also a great indicator of like how effective your product solves the problem it set out to solve, which is awesome. Then obviously your whole CAC to LTV ratios are like super, super important. Is the way you're buying traffic profitable? Um does it have viral potential? Um or is it capped? So, basically knowing where the tip of your ARR curve is going to be and how far you've been able to push that in terms of budget. That's number two. Number three is basically talent, team composition, who's in the team. You, you

14:00know, I'm seeing so many incredible solo founders who want to build stuff and basically hit that kind of million-dollar exit within a within a year. Super doable. We've seen it happen time and time again. A lot of deals that we've been a part of. However, there can be some confusion when people say, "Hey, I'm a solo founder." Amazing, but how many consultants are you using? How many outsourcers are you using? Completely fine to use them. Everyone does and it's a really cost-effective way of scaling

14:22up your business. But just great to be honest about it. Hey, I've got X number of devs in, I don't know, Brazil, Turkey, or India, and I've got a marketing guy in California. Just so you know that even though you are a solo founder and it's just your equity, there are other players involved and and the buyer will need to account for that. That's number three. Number four is all this research around the kind of category you're playing in. It's a very different app whether it's playing in education, fitness, photo and editing, or if it is indeed like a QR code scanner. The competition matters. How well-funded is

14:52the competition? How aggressive is the competition on UA, for example? Um so, that's so super, super important. And the fifth point I will say has to be whether you've raised money or not. If you've raised money from VCs, then your valuation is going to be inflated because you have to keep your VCs happy. If you haven't raised money from VCs, then maybe you're bootstrapped or you've done a a friends and family round, the power is all yours. You can sell at a lower valuation, but you're keeping a lot more money to take home and start your next project with or retire your parents or buy a house or whatever it

15:21might be. Um but I want to throw this to you, David, because it's something we talk about a lot at Blue Throne, which is do you think it makes sense for consumer apps to raise VC money in this day and age? I think it can. And I was actually thinking about that on the drive here of what kinds of apps are truly investable in 2025? And you know, looking back at my six years of RevenueCat, you know, I've talked to hundreds hundreds of founders and app practitioners and you know, all sorts of folks in my office hours, at conferences, at you know,

15:54random meetings I end up getting booked. And I'll say I feel like I was a little naive you six, five, four years ago around you know, just how far different apps can be taken. And I think in 2025, we've kind of seen things play out enough to know the different scale opportunities and the true like total addressable market of these apps. And so, I think, you know, if you're playing in a niche where there is not a very you know, and being realistic about it, you know, is it a niche where there's a high willingness to pay? Is it uh a niche that's growing or or going down? Like uh pickleball is

16:38a great example. Like I talked to a friend recently who was thinking about building an app in the pickleball space. It's like, "Oh, so hot right now, you know, getting in with pickleball influencers." And like that's all really hot. Well, pickleball seems to have already been like kind of like rounding the curve He's better off chasing paddle instead.

16:55It's the new one. You know, so maybe even two years ago, it seemed like, "Oh, wow, like maybe a pickleball app would be investable because it's growing, your TAM is expanding, and that kind of stuff." But I'd say, you know, today we've seen that curve rounded, and I think you're looking for those kind of trends as well of like realistically how big is this market going to be, you know, what are your realistic LTVs in that market? And I think that the barrier for consumer apps to be investable in 2025 is just much higher. And I think we've seen some slowdown, especially in early investing

17:29in these kind of apps because of that. And so, if you think you can build a category winner in a category that has meaningful LTV, meaningful growth, meaningful market, you know, so fitness apps, even I mean, even mental health is tough these days cuz like, you know, we saw Calm and Headspace kind of tap out, and now they're going be more B2B, and like, even these big kind of category winners that, you know, 3 years ago seemed like they were just going to keep growing, we've seen them kind of start the growth start to slow and see them kind of reach saturation in some of those markets. Um so, yeah, it's it's

18:05tough these days. I don't I don't know that, you know, on the spot I could come up with any kind of formula of what I think is investable or not, but like taking some of those factors I just shared, and you know, thinking carefully about the potential for retention, and I mean, there's just so much that would go into me today saying, "Oh, yeah, slam dunk, this is

18:25investable." Mhm. It's a good question. I've been thinking about this a lot as well recently because, you know, we have so many founders come through our doors who have raised VC money and then regretted it, and some who haven't raised but then want to. And I feel very strongly that I think at pre-seed and seed, unless you're building something with uniquely defensible tech, forget about it. You just don't need it. Why? Because unlike most businesses that need VC money, they need the VC money to get going, to build, to create the product. But in consumer apps, the barrier to build is so low, you only need maybe 10, 15,000

18:53dollars to really get going, and that's, you know, if you're if also if you're paying someone to build it, right? So, when do you need the extra money, like the cash injection to really shoot for the stars? It's after you've done your very smart marketing, and you've got your initial batch of users, and you have KPIs that tell you your app is an engine that works, that when it brings users in through the front door, it solves their problem and pushes revenue

19:13out the other door. Until you've proved that and you're ready to put millions into your marketing machine, you don't need it. Forget it. Or to your point earlier, if if you have something you think you can build truly defensible technology, then maybe raising earlier does make sense. If there's like a clear signal that if we build this, it will make sense and we can't build this without a certain amount of money. Those would be the more traditional kind of big doing early

19:40stage funding. many apps can you think of that needed millions just to get going? Callan AI is a great example. I actually have, you know, my my respect for that team has grown while I think for a lot of people in this space their respect for them has diminished as they released the course and they've been doing all these, you know, shirtless videos and

20:00and stuff like that. Uh you know, clearly you know, they're young and everything, but if you look at what they did, you know, they did start super scrappy. And this is why early on I really was very dismissive of them because I opened the app and it was a really crappy app. But they took that crappy app that didn't actually work, that didn't do what they said it was doing. It I mean, honestly, and this is again why I was like dismissive of them early on. I was like it doesn't do what they say it does. And yet they're marketing it as this like amazing solution. But to their credit,

20:33they have since like actually built out that tech. So So to your point, you know, maybe you build a painted door app where you prove out that people are willing to pay for this and then you go build it. And that can work, but I think there aren't a ton of categories that you can do that in where that the app that doesn't work will actually sell. I mean, they were selling a lot of like hopes and dreams and promises Yeah, but they kind of um they doubled down on something we said, you know, 10 minutes ago, which is distribution owns the game right now. And these guys, you

21:07know, Alex, Blake, Zach, they're killer distributors. I've got like a kind of bone to pick here because what they've done is insane. Yeah, but every time they jump on a podcast or an interview, they talk to someone who's from like the kind of success sphere or a kind of growth marketer. I would love to get like Alex and Zach like onto an app podcast like this so we can push them on things like paywalls, AB testing, product depth, mechanics, etc. In fact, let's call them out right now. I think we should do that. So, Zach and Alex, you've both got my phone number because we've spoken in the past. I challenge

21:36you to come here and jump on the podcast with me and David. We're going to push you on your actual app mechanics and performance. Flights are on me between Blue Throne and Revenue Cat, we can probably cover it. I'd love to have you here, and let's actually put you through your app knowledge and see what's going

21:48on there. I'd love it, and and Blake, too. Blake Blake is super smart. yeah. But anyways, what I was what I was getting at with that is that I think there are cases where where you're not going to be able to do those kind of painted door tests where you really have to actually build the product first. I I think that's more rare, but I think there there are plays where that might still make sense in 2025. I don't think for every possible use case, for every possible I mean I mean this is what's so cool about this space though is that like we're building things on these

22:17little supercomputers in people's pockets that can do such incredible things. And and I feel like just over the last like 5 years, the broader industry is starting to wake up to just how much opportunity there's still is in mobile, and then the subscription monetization unlocking that long-term revenue and being able to pay that back where I do think starting today category leading apps that are going to be billion-dollar companies in the future can be built today. Some of them may be built like KAI where you you build an app that doesn't work and hype it up really good and you're incredible at distribution, and then you figure it out. And again,

22:59what I was where I was getting at earlier is like KAI Ai a fantastic app now and and and props to those guys. It's genuinely a a great app. I watched Blake on on a YouTube video with one of the success guys. He actually drops a lot of knowledge bombs in there in between the like discussions of cocaine and all sorts of other stuff about what they're selling and one of the more I thought cogent things he described is that, you know, for people who are tracking calories, it's not all about being perfect in the calories. Even if you have even if you log every food

23:31perfectly and everything else like that, it it you know, calories can vary, people's metabolisms vary and all those kind of things. And so one of the things he said is like by helping people just be more aware of their food intake, by taking pictures, by like just the act of tracking, whether it's accurate or not, he claims they're at like 90% accuracy with the

23:51camera. I still doubt that. know about that. But he's right in that just the act of tracking your food is going to help a ton of people lose weight, get healthier, you know, be more aware of what they're putting in their body. And so I I I think that's fantastic. And hey, and and props to them. They're selling it for 30 bucks a year, you know, they're not charging $300 a year, they're not charging 50 bucks a month or something like that. The value that they're delivering compared to what they're charging, I think these days it's actually incredibly favorable. Like 30 bucks a year for that app, I think is

24:23a great value and I wouldn't be surprised to see them have better retention than a MyFitnessPal or some of these other big apps that are charging way more money because it's like, ah, 30 bucks, $29.99, like it's not that much money. To circle this all the way back around, um, you know, I think there's opportunities to do it that way, but then I also think there's opportunities to build future category leading billion-dollar apps that will require much more investment and I don't think as an industry we should close our mind to that potential just because an app like Calorie Ai worked out the way it did. That's not

24:59going to be the norm and I don't think it's the only way to do things. And so I do think that there are apps that will require investment to become the category leader. I think as we step strongly into this marketing and distribution first playbook for apps, we're going to see the CEO founder be a

25:15marketing guy. And then we're going to see them hire or outsource their dev work cuz it's not that effective. I just wanted to But but again, I think true for some segment of the market, for some segment of use cases, but I think we're going to see technology forward CTO, ridiculously talented programmer, amazing technologist first person who's going to build a category leading company as well. I think we're seeing this this like rise in that style and the app mafia is a great example of it, but I think that's one part of the market. And I think they themselves are maybe a little um over indexing on that being the playbook

25:53and the only thing that's going to work moving forward or you're like the way to build. I think that's one way to build. I think that's one way that things are going to be done. So yes, I think we will see more of the kind of marketing led CEO, non-technical led companies that are built that way. And maybe you know, maybe historically that's only been 20% of the market and now it's going to be 30, but I don't think this is going to like take over the whole market. I think it's going to continue

26:19to be a spectrum. Yeah, definitely a spectrum and we see a lot of these technical first founders who were great coders, but then can apply the skill set of learning coding to all the different bits and bites, whether it's optimizing UA or building out the infrastructure, optimizing that team. And what you just said really reminds me of um a company we just bought in Brazil. It's like some incredible technical founder who is one of those jack-of-all-trades that kind of learned through necessity how to do a bit of everything, how to do UA, how to build back end, front end,

26:46etc. And it just goes to show that if you can kind of go on to that skill set and build something that people want, he uh you know, he lives in Brazil and he walked away with like over $4 million cuz he didn't raise any VC money. He just built from the ground up from his bedroom and within a year and I think 6 months of launching his app, he walked away with like $4 million and the deal went through in like 3 months cuz there was no VCs to mess around with. It was

27:07like straight to his bank account. Crazy. And there are a lot of people like that. We see them We see them all around. So, let's circle all the way back around. We we chased a bunch of rabbits, but we were talking about red flags for early acquisition. I wanted to throw one more in there. And if you're building that kind of app and you're thinking about an acquisition, a huge red flag is to try and juice numbers leading into an acquisition. So, tell me about how what

27:34you've seen and how bad that can be. We've seen this a couple times where, you know, founders are getting prepared to sell. And so, what they'll do is they'll try and pump revenue to make that that numbers look really good. And what does that actually look like? What does that mean? What does that mean? Pump revenue or pump growth? So, so to pump revenue would be something like in your your paywall, you optimize the UI and UX so that you're really pushing that lifetime subscription, which is let's say $100, right? Yeah. And your your monthly is 50 and your weekly is 10. So, suddenly you're you're collecting those $100

28:02much, much faster and more in the early days, which on your P&L is going to really bump up your revenue and consequently bump up your profit or EBITDA as well. However, to the person who's about to acquire that app, they suddenly cannot monetize those users that you've just sold a lifetime subscription to. So, you're actually kind of shooting yourself in the foot. We've seen it happen a couple of times. I understand why people do it. It just ends up like um you know, knocking down the negotiations further along the line, which is not great. You can also pump growth, right? You can also really put your foot on the gas on marketing. We

28:33see that happen as well. That's not as bad because it actually collects a lot of data for the acquirer and the seller as to how effective marketing is when you really try and push the buzz budgets as high as you can go. And in fact, one One the first questions I'll ask when I'm getting to know a founder for the first time is I'll ask what's your marketing budget and they'll tell me I don't know, 50k a month. And then my second follow-up question is always how

28:53high have you been able to push that? And if you're not pushing it, why aren't you pushing it? So, knowing the answer to that is very important. There's a flip side to this where the founder can also optimize for profit. So, let's say they're running at spending $50,000 on marketing month over month, they think about selling. So, they're like, "Hey, I want to sell a profitable app cuz I'll

29:11get a better multiple." They cut marketing from 50 to 10. And once they cut marketing from 50 to 10, they still kind of run off of the cohorts they previously bought. But at some point the downloads are going to follow that drop as well. So, it can be a problem as well. So, I'd say it's if I was to categorize for anyone listening like what's more dangerous, optimizing for profit or revenue, I'd always say it's more dangerous to optimize for profit cuz you don't want to mess with your download stream. It's

29:37better to optimize for revenue. Yeah. And to to that point, you know, if you're spending a million dollars a month and and on this podcast we've we've talked a lot about paid acquisition and not getting over dependent on it and maybe like ideally you're not, you know, spending every penny on marketing. But even if you don't have amazing retention, but you do have a decent product and let's say you're doing, you know, 40% annual retention, which would be above me or even if you're doing median like or below slightly below median at like 30% retention on your annual plans, if you're spending a million dollars a

30:09month this year, that's 300k a month of free cash flow next year if you can do that million a month this year profitably or even break even. So, if you're breaking even on a million dollars a month of marketing today and expanding and growing faster. And so, this is to your point like if you're optimizing toward revenue and you have decent retention, an acquirer is going to see that and see, "Okay, so what? They're spending a million dollars a month break even." As a you just even as just a financial instrument, if you know that that retention is going to be 30% ish, if you can predict that,

30:47300,000 a month in free cash flow next year, that's an attractive thing. And to your point also is that you you at least see that that's possible to spend at that level and be at least break even if not profitable on that spend. I really agree with all your points and I think we should like take two steps back and put everything in a box for

31:06people. Different acquirers look for different things. And we can pretty much split them into three different acquirers. You have your strategics, which are people within your niche or within the larger tech sphere that want your product for maybe its features or its user base. Let's give an example, right? If you're building a dating app, a strategic buyer

31:25would be Tinder, Bumble, Match.com, etc. A great example of strategic buyer just recently was Strava buying Runkeeper. Exactly. That's a great example, right? They're buying it for the users, for the data, for the cross-selling. That's one example. And by the way, founders, if you're listening, like you can often get a bigger multiple if you sell to

31:42strategics. And the team. Runkeeper was an incredible team. And I know a lot of those folks. It can often be a great outcome. The only downside to those outcomes is they'll they'll look for a pretty big earnout because they they spot you as a talent and they want to keep you internally. So, that's one. Second type of buyer is more of a private equity focused buyer who are basically looking for profits or EBITDA. They want to see really really great margins. These guys,

32:04the upside is there's a lot of round. The downside is they're going to want you to stay on board because they don't have the team to manage your app. They need you to manage your app. And the other downside is they're going to optimize for like EBITDA, so it might get a little bit messy. Not naming any names, but they generally like to cut

32:18the team. Um then your third piece of the puzzle is these kind of like app acquirers similar to Blue Thorns and a bunch of other in the industry. I'm not going to do them any favors and shout them out. Sorry, guys. But essentially, people like us, we want to buy the app for its future growth potential. And the benefits there is that the founder doesn't need to stay on for a super long period of time. It's often a very, very short handover with a lot of cash up front. You kind of take the money and

32:41walk away. And companies like this will try and take that app to be a category leader and hold it there for as long as possible. The first deal we did was in was in the music entertainment space. It was a solo founder. Uh we paid him basically seven figures. Seven-figure deal for an app he spent two years building and the deal was closed within two months. That was almost four years

33:00ago. We bought it at about 200k MAU. And since then, we added to the team. We hired a killer GM from Spotify actually to manage this music app. We grew the team from five to 15 people and we grew the MAU from 200k to almost 6 million today and it's still pretty much top of the category. When I'm talking to a founder and they ask for a case study, I always give that one. But actually, because we're judged on our track record, we have to be very strict about the deals we do because one bad deal can kind of torpedo the whole company. So actually, our track record is great for

33:31now. But with M&A and this kind of playbook, you know, one bad deal can really mess things up for good. So in that third category that you were just mentioning that you lumped Blue Throne into, there is a very wide spectrum. And so I'd say there is the Blue Throne 1.0 of buying a ton of apps, looking at more financial instrument. So

33:50tell me about Blue Throne 2.0 though. So Blue Throne 2.0, it's a great question. Essentially, we learned our lesson that buying this kind of wide diverse portfolio of apps doesn't really work cuz you're buying financial instruments. And at the end of the day, we were apps guys and we knew apps and our team was made up of guys from mobile gaming like myself, from ad tech, and from consumer

34:07tech. So Blue Throne 2.0 is really about finding apps that have found product market fit, that have a lot of organic traffic, which is a great signal for us cuz it means no one is being paid to download your app. They found it out of word of mouth or K factor or just searching for something on the App Store

34:21themselves. And these product market fit apps have enabled themselves to rise to mid or top of their category by providing a deep product experience that solves the issue they set out to solve. That's the first thing. And we realized if we acquired these and actually invested in them and the team, we could keep them as category leaders for as long as possible and really turn them into like standalone companies. And so all the apps we buy have like a significant brand image, they have really strong organic traffic, they have great retention, great resubscriber rates, and of course like a killer founding team. Now, sometimes the founding team wants to stay and that's

34:55great, we love that. We've had people stay with us for like 3 years. Sometimes they want to take their money, buy a house, buy a car, pay off their parents' house, and go. That's also fine with us. The whole deal structure is about finding what works for both parties. But that strategy we've been employing for about 2 and 1/2 years now, and it means our our portfolio is much smaller. We

35:13now have a portfolio of five apps. I saw your face there. Looks a bit surprised there. It's true, it's only five apps, but each app is either a product leader in its category or on its way to be. So it's a completely different strategy, but luckily it's working well for us now. I've talked to the founders of Blue Thorne a few times over the years, and so I knew Blue Thorne as the old strategy where there was like 100 plus apps in the portfolio. And so when you told me that Friday and then when you told me it again today, it is surprising because it's not what I remember and

35:41think of Blue Thorne as. But it's obviously a whole different ball game, and and I I mean personally, you know, if I were in the app acquisition space, this is the approach I would be more taking. Which Blue Thorne 2 or Blue Thorne 1? Blue Thorne Blue Thorne 2, yeah, obviously. you a question. If you could buy any

35:58app, what would you buy as David? Oh, that is a really good question. Um off the top of my head, I'd say my friend Ryan Jens's app Flighty cuz it's it's just one of those kind of category leaders with so many opportunities. I don't know that 50 million would do it at this point. He's crushing it. Um but you know, high retention, you know, high willingness to pay, um a lot of like ancillary uh opportunities in the travel space to partner with companies. So, like there's obvious like future B2B plays. He's done almost no paid acquisitions. It's very organic

36:35growth. I think my dream app is probably Opal, the screen time app, for a few reasons. One is Well, they raised VC, though. They did raise VC, so I'll be paying a pretty penny for it. I don't know if I can afford it, but I love this app because the design is incredible. It looks like it was built by Apple in Cupertino itself. The problem it's solving is super significant, basically

36:52helping people stay off their phones. And they've unlocked this crazy LTV. You know what they charge yearly? Mhm. 120. 120 bucks per yearly. And the whole logic, I've listened to a bunch of interviews by by Kenneth, the founder, who's super smart. The whole logic is they target knowledge workers, and they say, "If I can reduce your screen time by 50% a week, you'll be making more money in your in your probably high-paying job." And that more money you're making is well worth more than the 120 bucks a year you're going to be spending on my app. So, you're better

37:21off spending the money. And it works. It's a fantastic business that solves a real problem. So, Kenneth, if you're interested, come find me, but I'm I'm also not sure I can afford you, but yeah, shout out. Well, I I love Opal, as well. I've had Kenneth on the podcast. Actually, he just emailed me this morning about our App Growth Annual Conference. So, this is not to take away from Opal, but let's let's play it out. Some of the red flags, some of the challenges in the category. Because Opal and other apps have done well, there's now a proliferation of this these apps, and so there's a ton of competition in the

37:53space. How have you been thinking about a space like screen time management? I assume I'm going to put words in your mouth here, but I assume it's that that even in these spaces, there will be the kind of category winner. So, that even if there are 100 apps doing similar things, if you can buy the category leader, they're going to continue to thrive

38:16regardless of what the competition is. But you wouldn't want, based on Blue Throne 2.0's positioning, you wouldn't want to buy one of the 100 other apps to go compete with Opal. And you've probably looked at some of them because they're so clearly breaking away from the crowd as the category leader. Is that Is that how you think about

38:38this? So, you're you're a bit unlucky here cuz I actually did analysis on this the other week. So, I'm going to hit you with some data here. Screen Time is a really great category because if you do a if you go on Sensor Tower and you do a cross-section of downloads over time and you stack them, there's a great viewing

38:53way of doing this on Sensor Tower. You can see that not only not only is the category growing over time, which is great ever since Apple allowed you to use the API to to build these apps. But, what you can see is that if you cross-section it by downloads, every time a new app enters the market, the whole market grows. And to me as like a an investor or a buyer, this tells me there are users that the market leader has not tapped into yet. That if a new entrance comes in and has a different value proposition or branding or appeal, they can actually capture the capture

39:21those users. Um so, that's really interesting. And the same thing happens with the revenue. If you cross-section this category by revenue, you'll also see that every time a new company pops in and there's been, you know, one from YC and a couple of others, they're able to capture market share without taking it from Opal even though Opal is clearly the category leader. So, in this niche in particular, I would feel okay with buying something that isn't a category leader cuz I think there's space for it to grow. You've also got to remember that Screen Time is like a

39:46pretty new category. Yeah. Weather apps, QR code scanners, they've been around for decades. Screen Time has only been around for like less than 10 years, probably more like six since Apple got the API. Which brings me on to another topic of like Sherlocking. You know, some might say, "Well, hey, Apple is providing the service organically on the phones anyway, so why would you pay $120?" And to that, I'd say, "Hey, if you offer a better experience with an improved UI UX, maybe some social features, you've actually got space to grow in it and

40:11that's been proven already." And I I was laughing. The camera would probably be focused on you during that answer, but I was sitting across from you laughing because as a parent, I can tell you that their screen time functionality sucks. And I I actually was just uh talking on Twitter with Kenneth, the founder of Opal. He said this publicly on Twitter that they're, you know, moving that direction and wanted to like do a user interview with me of like all the problems I have managing my family screen time with Apple's stuff. And And that's the thing about Sherlocking is like Apple does create great products generally,

40:49but any one of their products is going to have so many holes in it. And then specifically, some of their products just aren't great. And I would I would lump their screen time product into that. There is a challenge there that as they make it better, and this is an interesting one, you know, I have a weather app. And historically, Apple's weather app has been crap. Well, they actually did invest quite a bit. They bought Dark Sky. They invested a lot in the user experience and created a much

41:15better default experience weather app. Now, did that Did that take away from the rest of the weather app market? I actually don't think it did. Like I I probably should sit down and do a much deeper analysis like you've done. But there is always the potential that they will improve the product over time and and it could cut into the opportunity for that market to continue to grow the way it has. But historically, that just has not been the case. Fitness, they came out with Fitness Plus and it's

41:41bundled into the Apple One subscription. And yet we see Run uh and Ladder and so many fitness apps like Zero to One since Apple launched Fitness Plus doing incredibly well. So yeah, I don't think Sherlocking and Apple providing it at the system level or even as a add-on like Fitness Plus should dissuade you from playing in the category. In fact, maybe that's a sign that it's a good category to play in. And you go create that better user experience and serve the different use cases that Apple's

42:09never going to serve. Absolutely. Apple, for them it's a question of focus and ROI and if they the behemoth that they are turn their attention something that you're looking at, you're probably on the right track. Yeah, totally. All right. Well, I did want to dive into another topic and we we've done so many tangents we're we're not even going to cover probably half the topics we were

42:26planning on covering today. Um but I did want to talk about increasing LTV and kind of breaking through some of the ceilings. It's something I've been talking a ton about hybrid monetization. We've seen early leaders in the subscription space like Tinder, you know, find ways to better monetize through multi-tier subscriptions, through consumables, through one-time purchases. How do you think about the opportunities ahead because I think we're super early and I love that you come from gaming because I feel like gaming's perpetually 5 or 10 years ahead of the rest of the software makers. So, how do you think about hybrid monetization and and ways to increase LTV not just by increasing

43:09subscription price. Consumer apps on a subscription basis typically have maybe four price points, which is your your weekly, your monthly, your yearly and your lifetime. And if you imagine a graph with your X and Y axis and a kind of steps or stairs going up to the middle, you're able to capture user willingness to spend at four different points, the price point of your weekly, monthly,

43:29annual and lifetime. Yeah. Now, let me put a question to you app founders out there. Let's say you're charging 10 bucks for your monthly and you're charging 100 for your yearly, but you've got a user that's actually willing to spend 75. How do you capture that value? He's not going to pay 100, he might pay 10, but because he was willing to spend 75,

43:47you're missing $65 worth of value. Now, gaming cracked this a long time ago because gaming works on this curve that shoots up to the right and to the top of the graph because gaming uses gacha mechanics and in-app purchases, one-time purchases for example. So, if a gacha box costs you 99 cents and you're willing to spend $10, you'll make that purchase 10 times and the app has been able to capture all of the money

44:13you were willing to spend. So, how can you capture this from consumer subscription apps? Well, the solution we came to on Friday, which is of no surprise to anyone, I'm sure, is introducing in-app purchases, you know, one-time purchases into your app. And let's give an example. There's an amazing app called SoundMap, for example. SoundMap, I spoke to the founder a while back now, great guy called Zibo. SoundMap is Pokémon Go for music. So, you walk around your city using your phone and you'll find tracks in your city and you'll collect that music track, whether it's like a Drake song, and then you'll

44:42be able to trade that with someone else. Maybe they've got a Metallica song and you can trade that. So, there's peer-to-peer sharing there as well. Now, they have they have a subscription, which is capturing the majority of the value of the users, but they also have consumables and power-ups that, for example, let you discover two times more songs in your area. So, they're able to capture all the value of the users they're willing to spend. And I think the issue here for a lot of consumer apps is that they don't all lend themselves to this kind of monetization, but the real unlock we've seen from Blue

45:12Thrones level, talking to, you know, hundreds of app founders a month, is the ones that can crack this generally can create deeper LTVs, which gives you way more breathing room on your CPIs and and your marketing budget. Yeah, I think this is such an underexplored space so far in the non-gaming app world. And, you know, consumable IAP in some ways are is probably the holy grail and this is what we see with Tinder. And Tinder's a perfect example. One of the things we talked about over lunch was this famous graph from Ravi Mehta, famous to me. I I I just think Not everyone is as deep into this as you

45:48are. But, it's looking at that willingness to number of users across the horizontal axis and then in the vertical axis, that willingness to pay and and amount spend. And what's so beautiful about Tinder's model is that they have subscription tier, a lower subscription tier that can capture way more users at that lower price, and they have a mid-tier subscription where it's a higher price but fewer users. And then they have the highest paid subscription tier, which is going to be the highest LTV subscription with the lowest number of users. But then, layered on top of those boxes is those consumables where you can just perfectly match that demand curve all

46:29the way up and down. And so that is optimal. But to your point, like not every app can find that mechanic. I would I would say, look for it. Like, figure out if there's a way to do that. But if you don't, there's a ton of other hybrid monetization opportunities out there. And one that I think is still underexplored in subscription apps is ads. And even rewarded ads is something I've hardly seen in subscription apps, but it's one of those things where, you know, maybe if you're a scanner app and somebody's got zero willingness to pay, but they just need that one scan, maybe you do a rewarded ad and or you're doing

47:11an in-app purchase, you know, three bucks just for the one scan and then they can move on with their life. Now, for most apps, and scanners are probably a good example of this, you probably are going to be a higher LTV, you know, charging them on a weekly subscription and certain amount of people forget or whatever. But if you can make those kinds of things work, these are the unlocks we're going to see. And then, uh I'll be interviewing Michael Ribeiro from Condé Nast at App Growth Annual

47:38next month. And this is something they're doing is, you know, bundling subscriptions across their products. After somebody subscribes, offering physical goods. Like there's there's so many ways to build up those LTVs, not just with consumables, not just with ads, not just with rewarded ads, not just with Like there's there's just so many ways to to make that work. And then, you you know, to our earlier conversation about Strava and Runtastic, it seems like what they're doing When Strava initially acquired Runtastic, I was like, "Oh, it makes so much sense. Like, they're going

48:09to They bought a really amazing team. They're going to like incorporate all these amazing Runtastic features into Strava. Oh, yeah. Brilliant." And then, you know, 3 6 months later, you start seeing them do subscriptions that get access to both products. I was like, "Wait a minute. They're looking at this as a as a portfolio play, where they have Runtastic standing on its own and bundle in Strava, and maybe I I actually hadn't looked specifically whether they're doing that at a higher price point or just using it to acquire more subscribers because you're giving more value by giving them both. But, I think there's there's just so many creative

48:45ways that we're going to be that this industry is going to grow over time by layering on different forms of monetization. Yeah, and let's try and um distill that down into like one action item for like the app founders listening. I always try and do that cuz otherwise, there's so much data coming out there. The one action item is what's the easiest lowest hanging fruit in order to use either rewarded ads or one-time purchases in your app. The answer is just to build an an economy, to introduce a soft currency, which is gaming slang for a way of um building an economy that's not based around dollars. So, it could be gems or

49:16flowers or whatever whatever else it might be. Once you have the economy, you can then say, "Hey, here's a rewarded ad, which if you watch, you'll earn 10 coins. Or, here's a option to buy five coins, 10 coins, 15 coins at different price points. And if you're not sure how to do this cuz it's unfamiliar to you, my best piece of advice would be A, go and deconstruct the best mobile games, Raid: Shadow Legends, the game I used to work with, or Candy Crush, or, you know, uh Match Royale, or any of the Supercell games. Figure out how they're doing it. And if you're still in the

49:46dark, there are plenty of great consultants who can help you build like a gaming economy into your app. Or, look at look at Tinder. and you know, we had a podcast with the former Tinder employee where he went in depth about uh how they thought about layering on those consumables. Uh so that's another good example and and there's there's a growing number of apps that would be great examples to look at in this space. And another thing I would I would challenge folks on is there has been a big move to hard paywalls and that can be a very effective way to monetize and to to get that return on ad

50:20spend. But if you're trying to grow a category-leading company and the TAM is huge, most apps that do that are probably going to need to have some kind of free tier. And Duolingo's a great example of this. Like they they would never have become the company they became. And I mean, you can even look at the difference between Duolingo's and Babbel. You know, Babbel has been a hard paywall and Duolingo surpassed them even though Babbel was older because they allowed people to come in. And then what do you see Duolingo doing now? They're they've layered on consumables, working harder at monetizing those users. They have ads now. A lot of their

51:02ads currently are for the subscription, but you could see them layering on nice branded ads. So Duolingo's actually another good example for founders to look at of like how they've managed to do that with streak freezes and things like that. Now, some of Duolingo's mechanics are probably overplayed and probably not going to work for your app. I've had podcasts where we talk about that as well. It's exciting to me because I think there's just so many opportunities and I think we're going to see so much creativity. And then I'm going to have fun on the podcast dissecting what all these different companies do over time to to make things

51:35work. And like Ladder's a fun example. They recently started doing physical goods and I think for them right now, it's just kind of like a little side thing and it's not like a revenue driver, but I could see that kind of thing for a fitness app selling, you know, doing an affiliate deal with Vuori or or, you know, one of these big fitness brands where they're selling those clothes inside the app. People who are into fitness are going to be buying those things anyway. Can you create an experience in the app where it makes it better and then you do a rev share with the brand or create your own brand of of

52:07clothing that's as good or better than these other brands and doing that inside your app. I think there's just so many, you know, I I was talking to the to the founder recently about, you know, at what point are you going to sell like a home gym bundle? You know, where you just go into Ladder and you're like, okay, I want to join this team and the team's great, but like, ah, it's hard to

52:25find a bench at the gym and whatever. Like, can you sell them a $3,000 like home gym in a box, right? LTV. Yeah, I mean, that that's a thing. It's like, you know, uh Ladder already has an incredible LTV at $130 a year, but I think there's so many opportunities when you're a category leader, which I think Ladder already is and is going to be even more so recognized as a category leader in the coming months and years, they have a high willingness to pay in a category that, you know, people are willing to spend thousands, even tens of thousands of dollars now as people are

52:57looking at longevity and optimizing their health. Like, it's a whole like and then this is another like back to your point earlier, like, are you latching onto a trend that's growing or that's like tapping out? And that's one where they're latching onto a trend that already been growing tremendously and I think has room to continue growing time. And so then there then there's just so many opportunities for them and other apps like that to diversify monetization across all different kinds of things, not just like kind of layer on this, you know, one-time purchase. Like, for

53:28Ladder, I think that might be a mistake. That might not be a great answer for them to try and like build mechanics around that and maybe alienate some of their hardcore users, whereas they have so many other opportunities. And so I I think it'd going to fun to see how the industry progresses in the coming months

53:44and years. For sure. And a couple things to throw on top of that. The first one is a piece of advice for founders, which is how to avoid a quite a significant risk. So, if you do implement a hard paywall, and Apple finds out about this, there's the risk that they'll move your app from the free category to the paid, which will

53:59really mess with your ASO. If it's a super hard paywall, yeah, yeah, if they if they figure it out. So, just like a word of warning there on that one. Another thing to add is so, when I was working at Plarium, the guys who who made Raid: Shadow Legends, which for those who don't know is is a huge RPG kind of hero collection game that was doing about a billion a year in revenue at its peak. And one of my projects back there was to build the

54:18physical merchandise line for this game. And so, we looked into the different types of customers and what they were willing to spend on and what their likes were. And the way we were we were analyzing it was not as an additional revenue stream, but how can I increase the LTV of these users using physical products? And it might be a mug for $6, it might be a t-shirt for $20, or it might be like a super premium hoodie for $50. And I know that with my whales that are 2% of the user base, give or take, that are spending thousands of dollars on this game, I can then do this easy add-on of like a

54:50premium product just to show off their fandom for the game, and use that to actually influence my marketing spend cuz I'm actually increasing my LTVs there. That's really cool. I like that. Yeah. There's so much opportunity in this space to figure out ways to to lever up and grow in so many different ways. For sure. And I wanted to pull the conversation back to something else we were talking about on Friday, which is company strategy. We are seeing so many companies and founders that are building one app, and they'll kind of have some luck with this, maybe after a few

55:19failures. And this question we were kind of riffing on on Friday was like, when does it make sense to go from a single app company to a multi-app company? And if you decide to go to a multi-app company, should you buy or should you build? Right. Um anything to chuck onto that? Well, I mean, yeah.

55:36We talked about this a lot on Friday. Hard to summarize in a in a bite-size podcast. So we're going to have to I'll have to have you back on in the not too distant future to cover the 20 other things we could talk about. But I think from my perspective and then I definitely want to get you to tag on here is that I do think a lot of founders don't fully understand why they were successful and maybe overestimate their ability to pull off a second app

56:04and run the playbook a second time. I mean again we you know we're talking about the Call AI guys, right? You know their plan is to build a whole slew of apps. Now, you know, if you have lots of shots at bat which they're in a position now where they can take a lot more shots at bat, I think they're the kind of team and people who will have successes, but they're also going to have failures probably very public failures along the way because of

56:29how publicly they're doing all of this. Um but if you expect to win every time and you need a win to make it worth it, you might be better off doubling down on your existing app and and continuing to grow that versus thinking you can run that same playbook again and and make it work again. I I think the you know the hindsight bias of like oh I ran this playbook and it worked I can

56:56run it again 10 more times. Probably not. Maybe like the unicorn folks out there will. But what yeah what are your thoughts on like and and you know your you know another layer of this is you know if you've had some success you go buy another app and run your playbook on the app that's already showing some product market fit. And how do you all think about it at Blue

57:16Throne? So let's break it down into two questions. The first one is should you go single app or multi app? And the second question is if you go multi app, should you buy or should you build? So starting from the first question, I would always tend to agree with you which is stick with the thing that works because at At end of the day the top five apps are making 400x more revenue than the bottom 25% of apps, and if you've hit that product market fit, it's a bit like a, you know, a flash in the in the pan, so you want to kind of

57:40hold on to it. Now, building again from that and trying to build a second app comes with very similar risks to the first app, and there's no guarantee you'll do it again. So, which is why I don't I would encourage a lot of founders out there to actually start exploring buying apps. And yes, this does add competition to my industry, but that's fine. There's enough to go around. And here, it's much easier to measure the ROI of your dollars spent. And one of the frameworks we use at BlueThrone, it is really the ROI of a dollar. So, if I have a current app, and I know that if

58:07I invest $1 into this app today, I'm going to get back, you know, $50 by month three, and then $200 by month 12, whatever it might be, you have this data. When you're looking at buying another app that you want to apply your playbook to, you can say, "Hey, this app is going to cost me a million, and the ROI I expect is going to be X, because I know their revenue is Y, and their

58:27resubscribe rates are Z, etc., etc." You're then in a position to directly compare the ROI of that dollar to whether you spent a million more dollars on marketing your current app, because you should know that data. So, as founders, you're probably in a much more powerful position than you realize to actually go and analyze other apps in the market, especially if you're looking at apps within your niche, because you can directly compare what's their retention, what's their churn, what's their price points, LTVs, etc. And you can do a like-for-like comparison. And there's so much supply in the market, because AI is enabling developers to

58:58build and execute and publish faster. You'll probably be able to find stuff that's kind of interesting to you. Yeah, that's fascinating. I hadn't thought about it from that perspective. And this is one area I think a lot of folks, especially who were early in the App Store, like kind of my peers who were building apps in like 2010, 2015, and like today, they're, you know, they're doing millions of dollars a year in revenue,

59:18whether it's SEO or something else. Like, having some kind of organic channel that's succeeding often times is what helped to those apps into the position that they are in today. So, you want to really deeply understand that of like the success of your current app, and then looking at potentially buying another app, what you may be buying is somebody who also cracked that, and then you can layer on, you know, the paid I mean, there's so many apps that do get to 10, 20, you know, 30k a month in revenue. You could probably buy them for not that much money, but they haven't even you know,

59:55done a paywall test. They haven't done any paid marketing. And so, yeah, if you're a founder and you're really good at paid marketing and viral Tik Tok, or you you know how to work with influencers and stuff like that, I I think that is a really cool opportunity to like find some of those apps who who have that

1:00:12traction and then double down on them. Absolutely. And there's supply, there's opportunity out there to do it. More people should. We need to wrap up, but um I know you you prepared a fun little quiz for me with some data you pulled over the weekend. So, let's wrap it up with that, cuz I think it'd be a lot of fun. Sure. So, at Blue Thorne, we're talking

1:00:30to like a over 100 founders a month. Like it it's crazy at this point. We've got quite a big team for it. So, I went back into the CRM and I looked at the last 100 founder meetings we've had over the last 2 months, and I calculated some stats. I'm going to throw you a question, you tell me what you think, all right? Of the last 100 founder meetings, how many do you think were

1:00:47building an AI note-taking app? Yeah, I just saw somebody tweeting about this. I think it was don't go build a AI note-taking app. So, I'm going to guess it's high, maybe 30%? Oof, it's it's not that high. It's it's nine. So, it's closer to 10%, which considering the number of categories out there, it's still pretty pretty

1:01:08competitive. That's crazy, though. Next question maybe reveals a bit of a harrowing truth about our industry, but how many do you think were female founders? Not many. Um I do worry apps is turning into the next drop shipping, and there's going to be a lot of uh Whatever it is is like drop shipping bro

1:01:27is the caricature for a reason. I'm going to say less than 10%. Yeah, it's it's two. It's super super and maybe that's a factor of like a success bias thing as well, but it was only two which I think we need to change to be honest. Yeah. All right, of the last 100 founder meetings, how many do you think successfully raised VC funding for their

1:01:51app? Well, I know you're going after bigger, more successful apps now. You're not just kind of spray and pray with a bunch, so probably had higher quality 100 founder meetings, but I'm going to go low on this one and say less than 40%. Yeah, it was pretty low. It was it was close to 20%.

1:02:12Yeah. Um but we are seeing more and more um pop up these days. It's a time in the industry where a lot of apps were able to raise in 2021 when money was free and so now's about the time they've, you know, already cut the team, they've run out of cash, they're kind of looking for the kind of exit that BlueThorn would provide versus like a strategic buyer or an IPO or something like that, so And then they're now like raising their heads, right? They're now kind of out in

1:02:40the market, so we'll see them. Yeah. All right, last two for you. Of the last 100 founder meetings, how many were just solo founders with no full-time team around them? Oh, I'm going to guess a ton on this one. I'm going to go high, over 50%. It wasn't that high, but it was it was high compared to the other ones. It was

1:02:5634% which is which is still quite a lot. A third of founders that we're speaking to are solo founders which is pretty impressive, I think. Well, especially impressive given the criteria of who you talk to. Yeah, yeah. No, it's definitely the time to to build solo. And the last one I think cuz we're in the US, I thought I'd chuck a US one, but how many were

1:03:11US-based founders of the last 100? I'm going to go lower on this one, like less than 30%. No, actually it was a little bit higher. It was 45%. terrible. Yeah. I made it hard cuz it was out of 100. So, if I did it out of 10, it would have been easier. But, I think the US just has all the tools you need to build these really great products. And there's a key reason there's a key reason here which if you if someone on who's listening is doing TikTok marketing, they're going to know exactly what I'm about to say, which is to smash it on TikTok, you have to have your TikTok

1:03:41account based in the US. So, naturally, US founders always have an advantage, really. So, these guys are actually doing doing better compared to people around the world who have to figure out a kind of VPN and buy a SIM card, and it gets very complicated. that's the most surprising stat of this whole conversation to me. Just because I I I talk to so many founders all across the world, and you know, so many great founders coming out of Europe, Eastern Europe, Asia, you know, India. I've been surprised at how global the app industry is even though the US is the primary app market where users do spend most of

1:04:18their money. I mean, this may be kind of a bias in, you know, your travels and stuff, but, you know, RevenueCat, we've been looking at the data, and Japan and South Korea are two of the largest markets on in the world, and combined are closing in on some of these larger markets as well. Um so, you have US,

1:04:35then China, then Japan and South Korea. And I think those markets, language barrier, culture barrier, everything else, are a little underrepresented in in the broader kind of subscription app ecosystem. You know, US events, you're not going to run into a lot of them because language barrier, you know, RevenueCat, we recently did a thing in Japan, and um hired somebody in South Korea. Thriving ecosystems in those countries, but they are fairly isolated. So, uh so, yeah, surprising to me, but maybe a little maybe your stats are a little biased. If we took the the the kind of It's definitely not like a global uh

1:05:12representation of the population. There's some sort of success bias here as well. Well, that was fun. So, thanks for bringing the data and I think tossing it back and forth is was insightful and kind of interesting. So, thank you. And uh but as we wrap up, uh you always give a guest an opportunity to share, you know, anything you want to share. If you're hiring, looking for apps, or anything else you kind of wanted to talk

1:05:31about as we wrap up. Sure. So, uh Blue Thum we're full steam ahead on looking for our next basically app to acquire and maintain its like market leader position. Uh our budgets range from two all the way up to 50 million to basically acquire the next big app. And if you're building and have scaled already and want to basically look for your exit and get cash in the bank having built for for many, many years, um then feel free to reach out to me on LinkedIn, Josh Maybe we'll share my email in the show

1:05:55notes as well. But, yeah. Dude, thanks for having me. What's the uh what's the minimum you would say? Minimum annual revenue you would consider? Probably about 500k. Okay. That's the minimum annual revenue we'd we'd kind of go for just cuz there are like costs involved in getting, you know, all those processes started and the the the

1:06:10acquisition has to be worth it. Um but the core driver is really that the performance of the app, right? The KPIs internally and and the talent of the founder behind it. Yeah. Well, it's been a blast talking to you. Well, we'll have to hang out at AppGrowth Summit in a few weeks. Dude, I can't wait. I'm going to be coming back to New York just for your

1:06:24event. Yeah, and I'll have to have you back on the podcast sometime. So, thank you so much. much, man. Thanks so much for listening. If you have a minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.